Income Inequality and Rawlsian Justice

John Rawls’ A Theory of Justice (1971) provides an interesting perspective on how we might organize society. Rawls asks how we would do that if we could do so from an “original position.” This hypothetical original position denies us any knowledge about where we fit in society. This should allow us to deal fairly with things like social or income inequality.

Rawls abandons the natural law and state of nature foundations of classical liberalism. For some, this makes Rawls’ ideas something other than liberal. We don’t need to address that here, though. Without natural law and the state of nature foundations of classical liberalism, Rawls is trying to rebuild a sort of liberalism on a social justice foundation. This gives us an interesting perspective on inequality in society. We can apply this to a discussion of income inequality.

The Thought Experiment

Consider Rawls’ project for a moment. Central to it is the idea that we are going to make the fundamental rules for a community, with no idea where we will be in that community. If we don’t know what our position will be, we cannot advocate rules to give ourselves advantages. Rawls suggests that this leads us to be fair.

It isn’t that Rawls thinks we can ever be in his original position. Rawls is using the original position to define the conditions for thinking about the question. He then imagines the outcome of such a hypothetical discussion among reasonable and rational people.

Rawls suggests that people in this original position will agree upon two fundamental principles of justice. In their most primitive formulation, Rawls writes:

First: each person is to have an equal right to the most extensive basic liberty compatible with a similar liberty for others.

Second: social and economic inequalities are to be arranged so that they are both (a) reasonably expected to be to everyone’s advantage, and (b) attached to positions and offices open to all.

After further discussion, Rawls refines the second principle as follows:

Social and economic inequalities are to be arranged so that they are both (a) to the greatest benefit of the least advantaged and (b) attached to offices and positions open to all under conditions of fair equality of opportunity.

Rawls was a professor of philosophy at Harvard, and he was writing as a philosopher. That means his language may be a bit unfamiliar or dense. Let’s unpack his two principles of justice, so we can make them as easy to understand as possible.

Unpacking Rawls’ Principles of Justice

First Principle of Justice

The first principle of justice seems to require two things. First, personal liberty must be as broad as possible. We must be as free as possible. This is a broad requirement for maximum liberty for every person. The other part of the first principle sets boundaries around this liberty.

Second, though, there must be reciprocity in the liberty we have. In other words, if one person is free to do something, everyone must be free to do that thing. If I am free to sell cars, you must have the same freedom to sell cars. This doesn’t mean that we all must sell cars, only that we must have the same freedom to sell cars.

What if I want to decide what you are allowed to write while claiming the privilege to write whatever I want. That is a freedom I cannot have. If I am free to write whatever I want, I must recognize that you have the freedom to write whatever you want. I cannot have the freedom to restrict your activity in a way that I am unwilling to restrict mine.

The Second Principle of Justice

The second principle of justice is concerned with inequalities in society. Like the first principle of justice, there are two things we need to consider. We will look at them in the opposite order from which Rawls discussed them.


Rawls’ second principle of justice requires a fair equality of opportunity. Physical deformities, intellectual limitations, degree of parental engagement in a child’s life, or even personality traits someone has may make someone less fit that someone else for certain pursuits. These limitations are not imposed or created by society, but they may impact our position in society. Because such morally arbitrary differences may exist, there is not perfect equality of opportunity.

While there may not be perfect equality of opportunity, social structures should minimize creating new inequalities. They might also mitigate differences where possible. An example might be that the quality of public education offered to young students should be consistent, and not vary by the wealth of the neighborhoods where the schools are located.

Maximin Principle

The other part of Rawls’ second principle is the idea that inequalities must be structured “to the greatest benefit of the least advantaged.” This is often called the “maximin principle.” It emphasizes maximizing the benefits of the poorest or most disadvantaged in the community. Since we don’t know in Rawls’ original position if we might end up in the poorest group, this makes a degree of sense as part of Rawls’ overall justice as fairness proposition.

What the maximin principle tells us is that inequalities can be permissible if the increased inequality benefits the poorest people. Consider a medieval artisan, perhaps a blacksmith. The blacksmith, because he has special skills which are in demand, can accumulate wealth for himself. Inequality is created. If no one else benefits, that inequality would not meet the maximin requirement. If, however, the community benefits by having a blacksmith and the poor in the community end up with a better standard of living because the blacksmith is providing his services within the community, the inequality would be permissible. This is because it is an inequality that enables the poor to be better off.

How Can We Apply This Concept?

These two principles of justice seem reasonable outcomes of the original position. If we accept these principles, though, how much inequality is too much? What if the inequality arises due to differing life choices of the people? How can we establish that this or that level of inequality is or is not beneficial? Should we really focus on income inequality, or should we focus on the welfare of the poor, if that is our true concern? If the welfare of the poor is not our true concern, are we left with only envy to justify worrying about income inequality? These are all valid questions to consider.

We can measure both income inequality and the welfare of the poor. Let us suggest two measures for that. First is the Gini coefficient of income inequality. The Gini coefficient has a value between 0 (perfect equality) and 1 (one household receiving all of the income). Consider the mean income of the poorest quintile (the poorest 20%) as a measure of the economic well being of the poor.

With these two measures to use, we can look at some real world examples to see how they might relate.

Income Inequality: Some Empirical Observations

Looking at recent U. S. economic history, we find that the Gini coefficient for households is pretty constantly trending upwards, but sometimes it rises faster than at other times. Real (inflation-adjusted) income for the poorest 20% fluctuates more.

Two comparisons

Consider two actual five-year periods at the beginning of recent economic growth periods. In the first, income inequality rises by 0.014. In the second, it rises by 0.012. If we just look at income inequality, per se, we would think that the poor were worse off in the first period. Now consider that the first period saw the mean income of the poor rise by 8.3%. In the second, it fell by 8.4%. Which is preferable, the slower increase in inequality, or the increase in income for the poorest citizens?

Consider two additional five-year periods. In the first, income inequality rose by 0.017. In the second it rose by 0.002. With only the inequality data, the second seems better, right? Yet, in the first, the poorest saw incomes rise by 5.4%; in the second, they fell by 1.7%. Which is preferable, the slower increase in inequality, or the increase in income for the poorest citizens?

Data vs Partisan Loyalty

If you knew the political party affiliation of the president in each of these periods, would that shape your opinion? Each pair had one period with a Democrat in the White House and one period with a Republican in the White House. In one of the pairs, the Republican had the larger inequality rise; in the other, the Democrat did. If your opinion of which period is better would be influenced by knowing who was in the White House or who controlled Congress, partisanship is likely clouding your judgment. Instead, we should be focused on the data and we may need to recognize that policies aimed at reducing inequality may further impoverish the poor, or policies aimed at improving the condition of the poor may actually increase inequality.

Income Inequality: Where Should We Focus?

A profoundly unequal distribution can surely be harmful to the community. This is especially true where where the power of the state is used to enforce and perpetuate that inequality. Given the steady upward trend of the Gini coefficient, a case could be made that a corresponding upward trend in government economic intervention may be largely responsible for increasing inequality.

Government may intervene in the economy to redistribute income and wealth, through “targeted” taxes, subsidies, “targeted” tax breaks, and so on. When doing so, it picks winners and losers. Astute observers can figure out how to position themselves to be winners. Then, for those people, economic success comes from satisfying government’s political objectives instead of consumers’ (including low income consumers) wishes in the marketplace. When that happens, government assumes the role of creating and protecting the inequality such intervention creates. It would seem clear that Rawls’ principles of justice, taken seriously, would condemn this government-enforced inequality.

If we accept Rawls’ idea that inequality may be beneficial for all and given the empirical observations above, perhaps our main focus to help the poor should be on the condition of the poor. Maybe we should be less worried about how others are doing in comparison. Maybe we should be more concerned with assuring that government policy does not promote and protect inequality by picking winners and losers. It may very well be that directly pursuing reduced economic inequality as a policy goal is not only futile, but also counterproductive to actually helping the poor.